Services of General Interest in the EU

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Water, energy, health, telecoms and transport are among the most widely-known examples of services that public authorities consider of general interest and subject to specific public service obligations. 

Background

Services of General Interest (SGIs) are provided by a government to its citizens either directly or via the private sector to fulfil basic needs. These services differ from other services in that authorities must supply them, regardless of profitability on the open market. Accessibility to the public, price affordability and quality are key criteria for their delivery.

The EU describes SGIs as "market and non-market services which the public authorities class as being of general interest and subject to specific public service obligations". This broadly covers water, energy supply, communication, transport, health and social services, education and postal services.

The EU Treaties state that SGIs in the Union should "operate on the basis of principles and conditions, particularly economic and financial conditions, which enable them to fulfil their missions" (Article 14; TFEU). The provision and funding of these services is left to national governments.

SGIs are a key element of the EU economy, accounting for 26% of GDP and 30% of jobs across the 27-country bloc. One of the main aims of the EU's long-term strategic vision for 2000-2010, the so-called Lisbon Strategy, later rebranded 'Growth and Jobs', was to complete the internal market by breaking down national barriers in the area of services.

While the goal was to liberalise the transport, electricity and gas markets, other 'non-economic' services like social and health care were exempted, as their abiding to EU internal market and competition rules could have affected fundamental rights, social cohesion and social protection – core values of the Union.

'Economic' vs. 'non-economic' SGIs

SGIs can therefore be separated into two groups: services of general economic interest (SGEIs), which include an economic relationship between supplier and consumer; and those that are non-economic – security, justice, compulsory education, health care and social services.

Essentially, SGEIs are subject to EU internal market and competition rules and non-economic SGIs are not. 2006's Services Directive also covers certain SGEIs but no non-economic ones. Most member states failed to implement the directive by a 2009 deadline (see 'Issues').

In October 2007, a 'Protocol' on SGIs was included in the Lisbon Treaty, underling their value and potentially laying the ground for a new legal framework. However, the Commission refrained from proposing a directive on SGIs – a move criticised by MEPs and NGOs.

The Protocol affirmed that EU treaty provisions do not affect member states’ control over their non-economic SGIs "in any way". The Commission has since stated that no new legislative frameworks for SGIs are in the pipeline.

In January 2008, the EU executive launched an interactive information service on SGIs and their relation to EU law for the general public, member-state authorities and service providers.

Article 14 of the EU Treaty and the Lisbon Treaty Protocol therefore provide the legal basis for SGIs in the EU, while a series of non-legislative measures are currently being planned – such as a 'tool-kit' for public authorities and a voluntary EU-wide quality framework for social services (see 'Issues').

Issues

Services of general economic interest (SGEIs) involving large network industries – telecommunications, electricity, gas, transport and postal services – are all regulated by sector-specific legislation. Regulations and directives lay down the principles and conditions for operating these particular services in the EU.

The European Commission has pursued 'market-opening' initiatives in these sectors since the late 1980s, to help produce cheaper, faster, more efficient and more innovative services.

However, such liberalisation has in some cases seen public monopolies – particularly in the electricity and gas markets – replaced by a few dominant private groups, something that is not always beneficial for the consumer.

In the case of postal services, member states are currently implementing a set of 2008 directives aimed at opening up the sector to competition. Yet service providers are concerned that this will make the Universal Service Obligation (USO), which guarantees a frequent and ubiquitous service to all citizens, impossible.

Their fear is that liberalisation will result in new market entrants seizing the most profitable activities – such as business-to-business deliveries in cities – while neglecting customers in more isolated locations, causing incumbent operators to lose the resources necessary to service the most vulnerable. 

The postal services legislation features a number of flanking measures to ensure that the provision of universal service remains financially viable in a competitive market, such as direct state subsidies or a compensation fund financed by introducing fees on new service providers or users (see EURACTIV LinksDossier).

Some aspects of public service broadcasting are also regulated under the 'Television Without Frontiers' Directive. Other SGEIs, such as water and waste management, do not have specific legislation but are subject to EU rules on public procurement, state aid and environmental and consumer protection.

A number of SGEIs also fall under the scope of the Directive on Services in the Internal Market – the 'Services Directive'. Telecommunications, transport and audiovisual services are explicitly excluded, along with all non-economic SGIs.

The Services Directive

Proposed by the European Commission on 13 January 2004, the directive aimed to establish a single market for services by removing unfair administrative and economic barriers and creating a level playing field for companies across the EU.

Dubbed the 'Bolkestein Directive' after then-Internal Market Commissioner Frits Bolkestein, it triggered large protests across Europe due to its 'country of origin principle,' under which workers would be employed under the legal arrangements of their own member state.

The article was subsequently renamed 'freedom to provide services' and holds that member states must "ensure free access to and free exercise of a service activity within [their] territory," while allowing them to continue applying their own rules on conditions of employment (see EURACTIV LinksDossier).

The proposal excluded non-economic SGIs, but trade unions also pushed for the removal of SGEIs on the basis that they differ from commercial services and should not abide by the same rules. The European Parliament decided that SGEIs are covered in principle, i.e. if they are not explicitly excluded.

After much wrangling, EU member states adopted the directive on 12 December 2006. It applies to SGEIs only "insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them," in line with the EU Treaties.

For SGEIs covered by the directive – typically postal services, water and waste management, though member-state definitions of SGEIs vary – the provisions on "freedom to provide services" do not apply, whereas those relating to establishment in another member state do.

National delays

A deadline of 28 December 2009 was set for all member states to transpose the Services Directive into national law. The deadline was missed by most countries, though the European Commission claimed that many were likely to finish the job before summer 2010 and thus avoid EU infringement procedures.

However, on 24 June 2010 the Commission sent a "reasoned opinion" to 12 member states yet to fully implement the directive: Austria, Belgium, Cyprus, France, Germany, Greece, Ireland, Luxembourg, Portugal, Romania, Slovenia and the UK.

As of November, eight member states still have not implemented the directive and are facing EU infringement procedures. However, according to the Commission, most have indicated that they will transpose the directive into law by the end of the year.

Social services

Social services of general interest (SSGIs) are a specific category which covers social security, employment and training services, social housing, child care, long-term care and social assistance services.

In response to evolving social needs and budgetary constraints, EU member states are increasingly developing different ways to organise, provide and finance social services, for example by outsourcing certain services to commercial or non-profit operators.

In November 2007, the Commission published a new communication on SGIs including specific aims for SSGIs – but no legislative proposal. The EU executive then released its first biennial report on social services.

The Commission reiterated last October that there are no plans for new EU legislation on SSGIs, despite ongoing pressure from left-wing politicians and social NGOs claiming that the current rules can lead to significant problems for public authorities and service providers.

According to the EU's commissioner for employment and social affairs, László Andor, the Commission will now focus on ensuring that existing rules are implemented properly and fairly by national authorities, rather than any legislative proposals.

While admitting that "some adjustments might be useful," Andor says there was no need for radical change. "The existing rules offer much more room for manoeuvre in the social sector than people often think," he stated.

Health services

Health services in the EU are primarily the responsibility of national governments, with the EU Treaties stating that member states are responsible for the "organisation, financing and delivery of health services and medical care" (Article 152; TFEU).

Yet in some cases, as confirmed by several European Court of Justice (ECJ) rulings, EU citizens may seek health care in other member states, with the cost covered by their own systems.

Health services were excluded from the Services Directive along with SSGIs, despite numerous ECJ rulings showing that they can be considered an economic activity and that EU law can apply.

To provide clarity and legal certainty on the issue and to support cooperation between national health systems, the Commission proposed in July 2008 an EU framework to ensure cross-border access to healthcare services.

The European Parliament adopted the cross-border directive in April 2009, but it has been stalled ever since in the Council of Ministers – where national health ministers have struggled to agree to a deal.

No EU directive for SGIs

After non-economic services were left out of the Services Directive, then-EU Social Affairs Commissioner Vladimír Špidla and an alliance of trade unions, public service providers and the Socialist group in the European Parliament pushed hard for specific EU legislation on SGIs.

However, in November 2007, the Commission scaled down its ambitions and refrained from publishing a directive on SGIs, instead adopting a non-binding communication. The move was met with contempt by the alliance, which had formed a 'public service campaign group' (EURACTIV 21/11/07).

The Commission had signalled on several occasions that it was preparing a framework directive on SGIs, yet according to its president, José Manuel Barroso, the College of Commissioners no longer found it "useful" to publish such a directive.

Its focus switched to a more sectoral approach, whereby existing or pending EU legislation is reviewed to ensure that EU internal market rules clash neither with the provision of SGIs in one member state, nor with privatisation plans in another.

A Protocol instead

The Commission's decision not to issue a legislative proposal followed the establishment of a new 'Protocol' on SGIs in the Lisbon Treaty in October 2007. The Treaty came into force on 1 December 2009, following ratification in the member states.

The Protocol stipulates the need for "a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights," and confirmed that Treaty provisions "do not affect in any way" member states’ control over non-economic SGIs.

The Protocol effectively took the place of a framework directive, though its lack of depth has led to criticism and calls for clarity from service providers – particularly regarding regulatory limits to opening up social services to competition (EURACTIV 01/02/08).

The Lisbon Treaty also established a new "horizontal social clause," which states that the EU should consider social objectives when defining and implementing all policies and activities (Article 9; TFEU). The role of SGEIs such as transport, telecommunications, postal services and gas and electricity is recognised. SGEIs also feature in the EU Charter of Fundamental Rights.

In its 2007 communication, the Commission stated its intention to use the Protocol and its principles "as a benchmark to check the consistency and proportionality of EU policies and initiatives". It launched an interactive information service on SGIs and their relation to EU law in January 2008.

As there is no specific EU legal framework for SGIs, conflicts of interest or breaches of competition law are dealt with on an ad hoc basis by the EU's law institution, the European Court of Justice.

The future: No legislative measures?

Following the 2007 communication and entry into force of the Lisbon Treaty, the Commission has made clear that no new legislative frameworks will be proposed either for SGEIs or non-economic SGIs. The Protocol is therefore the legal basis for SGIs in the EU.

In October 2009, with the economic crisis in full swing across the Union, Commission President José Manuel Barroso tasked former European commissioner Mario Monti with preparing a report on the future of the single market.

The report also came in the context of the EU's new strategy for growth and jobs, 'Europe 2020', which was unveiled in February 2010 as the successor to the largely unsuccessful Lisbon Strategy of the previous decade.

Monti's report led to the Commission's 'Single Market Act' in October 2010 – 50 proposals aimed at rekindling the internal market, one of which is to improve public services. The Commission will therefore adopt a new communication and a series of measures on SGIs in the course of 2011 – though no legislative proposals.

The EU executive plans to provide public authorities with a 'tool-kit' covering all relevant issues surrounding SGIs, such as financing, public procurement and cooperation between different authorities. It also pledged to better evaluate and compare the quality of SGIs across the Union (see Single Market Act, pages 20-21).

Providers of social services of general interest (SSGIs) have been calling for more urgent change, however. On 26-27 October 2010, the Belgian EU Presidency hosted the 3rd Forum on Social Services of General Interest, attended by some 300 delegates, mostly representingorganisations responsible for delivering social services in the member states.

Many said they wanted the EU to pay more attention to guaranteeing the high quality of SSGIs. An alliance of eight associations asked the Commission to examine whether these services could be exempted from public procurement rules.

Delegates also discussed a voluntary European quality framework for social services, recently prepared by the Social Protection Committee, which brings together national experts from the EU member states. Employment and social affairs ministers approved the non-binding framework on 6 December 2010.

Meanwhile, the European Parliament is preparing to debate the future of social services next year. A series of recommendations will be drawn up and debated by MEPs in the Parliament's employment and social affairs committee during the first half of 2011.

Positions

In its October 2010 communication for a 'Single Market Act', the European Commission recognised that current EU rules on SGIs raise "a number of practical questions for the competent public authorities and for certain players in the sector, specificallyin the area of social services".

The Commission pledged to better evaluate and compare the quality of services of general interest across the EU and will examine "the suitability and possibility of extending universal service obligations into new areas in the light of changes to the essential needs of European citizens, potentially on the basis of Article 14 of the TFEU".

Speaking at the 3rd European Forum on Social Services of General Interest (SSGI) on 26-27 October in Brussels, hosted by the Belgian EU Presidency, László Andor, EU commissioner for employment and social affairs, stated that the EU executive does not see any need for major changes to EU rules on SSGIs.

"As part of promoting good quality social services we are committed to helping public authorities in the member states to better understand and apply the existing EU rules," Andor said.

He revealed that the Commission has prepared a guide on how to follow EU rules in the field of social services. He hopes that the guide, yet to be translated and published, will "address the uncertainties expressed by the public authorities, the service providers and the stakeholders".

At the Forum, Belgian Social Affairs Minister Laurette Onkelinx spoke out in support of SSGI providers, citing "the distance that exists between EU rules and the social needs of actors on the ground".

According to Onkelinx, local public authorities and service providers do not always have the necessary knowledge or resources to properly deal with rules on issues such as competition, public procurement and state subsidies.

She also complained about the administrative difficulties faced by local authorities when trying to use EU funds. "Many small operators believe that EU authorities are not interested in them," she noted.

The Belgian vice-prime minister asked the Commission to table concrete proposals for legislative initiatives that would help to bring about a more certain legal framework for social services. Onkelinx also called on the Commission to fully implement the new provisions of the Lisbon Treaty – especially the 'horizontal social clause'.

Poul Nyrup Rasmussen, president of the Party of European Socialists, welcomed the Commission's proposals for a Single Market Act, but said the EU executive should have brought legislation on SGIs back to the table.

"I welcome the fact that the European Commission is finally taking steps to promote the completion of the single market, but I am concerned by the gaps between the interests of the economy and the interests of the people," he said, citing the absence of a legal proposal to ensure high-quality, accessible and affordable public services.

For the European Centre of Employers and Enterprises providing Public Services (CEEP), Article 14 of the EU Treaty and the Lisbon Treaty Protocol require the EU to develop a specific policy approach for SGIs and lift the current uncertainties surrounding the various services.

"CEEP proposes a plural, gradual approach combining the dimensions of theme and sector. This would lead to the adoption of a number of legislative acts aimed at resolving, one after the other, the main common problems encountered. CEEP proposes further to that a prudent and pragmatic attitude which would consist of examining whether the existing secondary law is in line with the new primary law," it stated in an October 2010 opinion paper.

"Nevertheless, before any action is taken at the European level, CEEP invites European policymakers to carry out an exercise of stock-taking of all regulations, soft law and jurisprudence of the European Court of Justice, which forms the current 'acquis' of the EU for SGI and SGEIs, in order to build on the positive developments that already have been achieved," it recommended.

"Finding a sensible way to apply competition rules in social market economy will be the main challenge for the successful relaunch of the single market. And fully reconciling SGIs with single market policies is one of the necessary steps to meet this challenge. The need to set up stable and sustainable framework conditions to provide these services stands as a paramount goal," CEEP added.

The European Trade Union Confederation (ETUC) was a vocal critic of the Commission for not proposing a framework directive for SGIs. At the time, General Secretary John Monks said the Commission had "missed an opportunity to ensure that public services are sufficiently respected".

ETUC believes that Article 14 of the EU Treaty combined with the Lisbon Treaty Protocol is an obligation for EU action. "It is unacceptable that the Commission continues to abstain from any action. The ETUC asks the Commission to come up with a legislative proposal on the basis of the new Article 14. The previous demand for a 'framework directive' which was based on internal market rules is from now on replaced by the new demand for regulation(s)," it stated in a June 2010 resolution.

"The Belgian Presidency, the European Parliament and the European Commission are asked to act and to come forward with proposals to strengthen high quality, accessible, affordable public services, and essential for social, territorial and economic cohesion and to ensure more legal security in order to allow the development of sustainable public service missions and to guarantee fundamental rights," it concluded.

Séverine Picard, legal adviser to the European Trade Union Confederation (ETUC), sees the Lisbon Treaty as the grounds for a new, coherent EU approach towards SGIs – but this will have to be voluntary as Article 14 of the EU Treaty alone will not trigger any change.

"Only the European legislator can change the rules of the game by adopting a specific instrument on SGEIs. This will not be an easy exercise. In particular, a delicate balance will have to be found between the need for the Union to recognise the role and place of public services and the subsidiarity principle that is implicitly enshrined in the Protocol," Picard said.

"The Commission has not yet expressed the intention of taking action on the basis of Article 14 TFEU. It is, however, essential to launch a debate on the future of public services in the Union. Legislative inertia would be tantamount to the waste of a formidable opportunity for Social Europe," she argued.

BusinessEurope, the European employers' association representing 40 member federations, said that in the current context of spending cuts and environmental and demographic challenges, public authorities must develop ''innovate and timely'' responses and strategies in order to deliver services effectively.

''Member states must commit credibly to modernising the public sector by making public spending more related to economic growth. They need to strive for better public procurement, responsible and wise management of public funds and value for money in the provision of public services,'' stated the association.

BusinessEurope believes that more open competition leads to more efficiency, choice and innovation and therefore higher-quality, lower-priced and environmentally-friendly services. The latter is particularly important in relation to the EU's ambition to become the leading green economy in the world, it pointed out.

Stronger public-private partnerships are needed to boost innovation and while the existing legal framework for services of general economic interest is satisfactory, more transparency and better enforcement is needed, it added.

''We aim for fair treatment of the private sector in the delivery of public services. All factors of distortion, such as differential tax treatment, should be identified and sorted out at EU or national levels,'' concluded the association.

The Social Platform, which represents 43 networks of European NGOs, has praised the Belgian EU Presidency for its proposals aimed at clarifying the exemptions from EU internal market rules for SSGIs and hopes that a mandatory framework can be established.

"[The] Social Platform welcomes the adoption of the voluntary European framework. It encourages the EU in helping identifying and disseminating good practices and exploring the possibility of imposing a compulsory framework for certain SSGIs. The Open Method of Coordination [direct cooperation between member states] could be used to achieve this objective," it stated in October 2010.

Patrick de Bucquois of CEDAG, a European umbrella group for non-profit organisations, believes that the lack of a specific directive for SGIs can make life very difficult for authorities in the member states as many are unaware of the rules to follow.

"There are two kinds of problems. The first is that member states at all levels, including local authorities at times, do not have very good knowledge of European rules, which in turn leads to uneven application of these rules," de Bucquois told EURACTIV in an interview.

"Sometimes what we call 'golden plating' occurs, which leads to countries adopting national legislation which is even more demanding than EU rules," he observed.

Timeline

  • 11 Sept. 1996: European Commission communication on 'services of general interest' (SGIs).
  • 20 Sept. 2000: Commission updates 1996 communication.
  • 13 Jan 2004: Commission proposes EU directive on services in the internal market (the 'Services Directive').
  • 12 May 2004: Commission publishes White Paper on SGIs.
  • 15 July 2005: Commission establishes rules on state aid for services of general economic interest.
  • 16 Feb. 2006: European Parliament passes a modified (some argued 'watered-down') version of Services Directive.
  • 26 Apr. 2006: Commission communication on 'social services of general interest'.
  • 24 July 2006: Council of Ministers adopts common position on Services Directive almost unanimously. Belgium and Lithuania abstain.
  • 26 Sept. 2006: European Parliament resolution on Commission’s SGI White Paper.
  • 15 Nov. 2006: Parliament approves Services Directive – which excludes social and health services – followed by Council on 12 December.
  • 26 Nov. 2007: Commission publishes new communication on SGIs instead of legislative proposal.
  • 18 Oct. 2007: Lisbon Treaty Protocol on SGIs established.
  • 25 Jan. 2008: Commission launches interactive information service on SGIs.
  • 7 July 2008: Commission publishes first biennial report on social services of general interest.
  • 1 Dec. 2009: Lisbon Treaty enters into force.
  • 28 Dec. 2009:  Deadline for member states to transpose Services Directive into national legislation.
  • Jan. 2010: Member states begin mutual evaluation process of directive, to review aspects of their national legal frameworks applicable to service providers.
  • 24 June 2010: Commission sends 'reasoned opinion' to 12 member states for not fully implementing Services Directive.
  • 30 June 2010: Stakeholder consultation on directive begins, to help assess national measures implementing the legislation.
  • 27 Oct. 2010: Commission unveils 'Single Market Act', a set of proposals aimed at rekindling the EU’s internal market, including improving its functioning for services.
  • 6 Dec. 2010: EU employment and social affairs ministers approve voluntary European quality framework for social services.
  • Jan. 2011: Commission to report on results of mutual evaluation process and stakeholder consultation on Services Directive.
  • 2011: Commission to adopt new communication and series of measures on SGIs, but no legislative proposals; Parliament to debate future of social services in the EU.
  • 2011: Commission to review rules on state aid for services of general economic interest.

Further Reading

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